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Honigman leads client to victory in U.S. Court of Appeals patent term adjustment ruling

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On January 15, 2014, the Court of Appeals for the Federal Circuit (CAFC) decided Novartis AG v. Lee, No. 13-1160 and Exelixis v. Lee (Fed. Cir. Jan. 15, 2014), ruling that the United States Patent and Trademark Office (USPTO) incorrectly interprets the “B period” section of the Patent Term Adjustment (PTA) statute (35 U.S.C. § 154). Honigman Miller Schwartz and Cohn LLP represented Exelixis, Inc. The outcome of this case has ultimately determined how PTA is interpreted for all patentees. In particular, companies in the pharmaceutical and biotechnology industries are likely to benefit, as the regulatory approval process often results in the product being introduced into the market late in the term of the patent.

Specifically, the USPTO has taken a position that results in a severe penalty for patentees with respect to the section of the statute that relates to the three-year guarantee and the effect of filing a Request for Continued Examination (RCE). As a result, the USPTO improperly reduces PTA to the detriment of patentees.

On November 1, 2012, the Eastern District of Virginia ruled in favor of Honigman’s client (Exelixis) regarding the USPTO’s calculation of PTA. In subsequent decisions, the D.C. District Court found in favor of Novartis AG and the Eastern District of Virginia ruled in favor of the USPTO. The cases were consolidated on appeal, for which an oral hearing took place before the Federal Circuit on November 5, 2013. Honigman attorney, J. Michael Huget (Intellectual Property Litigation Practice Group Chair) argued against the USPTO’s calculation of PTA on behalf of Exelixis, Inc. in the consolidated oral hearing.

While the USPTO takes the position that a patent holder is not eligible for any B period PTA once an RCE has been filed, Honigman argued that the correct interpretation of the statute is that time consumed by an RCE does not count towards the three-year deadline for patent application pendency. In the alternative, Honigman urged the Court to hold that “time consumed by continued examination” includes only the time from the filing of the RCE until the Notice of Allowance. In the Novartis opinion, the CAFC agreed with Honigman’s latter argument, stating:

We reject the PTO’s view that the time after allowance, until issuance, is ‘time consumed by continued examination’ and is so excluded from adjustments given to the patentee. Such time from allowance to issuance undisputedly would count toward the PTO’s three-year allotment in a case not involving a continued examination. There is no basis for distinguishing a continued-examination case.

This victory will have a significant impact on the calculation of PTA in cases where the applicant filed an RCE and the patent was not issued within three years after the filing date or commencement of the national phase. It will benefit clients with patents in which the value of the invention remains, or is even amplified, towards the end of the patent term.

What is PTA?PTA is the period of adjustment of patent term due to examination delay. The USPTO is obligated to meet certain requirements related to timing during the examination of an application for patent, such as the “guarantee of no more than three-year application pendency.” When these requirements are not met, the patentee is given PTA as a remedy. The result is that the patent is enforceable beyond the base expiration date, by however many days of PTA to which the patent was determined to be entitled.

What is an RCE?An RCE is a mechanism to submit claim amendments after the examiner has issued a final rejection. It is a tool that is available to applicants and is often used to conclude prosecution when the examiner has indicated that additional examination is necessary to determine whether the amended claims are allowable.

Why this is Important?As a result of the favorable decision on behalf of Novartis (and Exelixis), many patentees in cases where an RCE was filed will be entitled to more PTA than they have been given by the USPTO.